FX Action was light in N.Y. on Tuesday, with no data to drive the Dollar. Risk taking levels were fairly neutral, though Wall Street lost ground on corona virus fears, and Treasury yields were a bit lower. The USD slipped some ahead of the open, weighed down by a better German ZEW outcome, and improved U.K. employment data. The DXY recovered some through the morning session, though major pairings were confined to narrow ranges. EUR-USD ranged between 1.1119 and 1.1089, while USD-JPY headed to 109.78 lows from 110.12. USD-CAD was stuck between 1.3049 and 1.3074, as Cable held above 1.3040.

[EUR, USD]EUR-USD found buyers following the better German ZEW report released during the London morning session, eventually peaking at 1.1119, up from lows of 1.1085. The pairing has since eased under 1.1090, with eyes now on Monday's near one-month low of 1.1077. The approximate 1.1100 to 1.1200 trading range that has been in place for a week now, may be about ready to give way to selling interest, A an outperforming U.S. economy versus Europe, along with the Dollar's interest rate advantage should continue to weigh on EUR-USD.

[USD, JPY]USD-JPY touched 109.78 lows in afternoon N.Y. trade, down from 110.12 highs early in the session, and 110.22 highs seen during Asian trade. Concerns over the outbreak of the corona virus, which began in China, resulted in some risk-off market moves, which have supported the Yen. The pairing hit lows when Wall Street fell on reports of a corona virus diagnosis in Seattle, Washington. The BoJ left monetary policy on hold overnight while nudging up growth forecast on receding global risks, although trimming CPI forecasts, as had been widely expected, which has little impact on USD-JPY.

[GBP, USD]Sterling consolidated gains seen during the London morning session following UK employment data, which broke a run of sub-forecast data releases. The data, along with an expected post-election rebound in January PMI surveys, strengthens our conviction that the BoE will refrain from cutting interest rates at its meeting on Wednesday, as we see most MPC members wanting more time to assess the impact from the clearing of the fog of Brexit and political uncertainty in light of the election. Cable rose by nearly 75 pips in printing a high at 1.3083. We expect the pound to hold up for now, but we aren't bullish over the longer term, with Brexit and the possibility for a no-deal departure from the EU remaining on the table at the end of the year.

[USD, CHF]EUR-CHF extended recent losses to a fresh 33-month low at 1.0730. This is the sixth week out of the last seven that the cross has declined, with losses accelerating this week. The reason for the divergence in the two main currency safe-haven currencies, the yen and the franc, is the U.S. Treasury having added Switzerland to its list of currency manipulators this week. This seems a bit rich given the franc is a demonstrably chronically overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index). The U.S. argues that Switzerland needs a more expansive fiscal policy. The CHF-JPY cross is now trading at 13-month highs after rallying by almost 5% from levels seen in late November

[USD, CAD]USD-CAD remained stuck in familiar ranges, revealing little movement following the softer Canada manufacturing data. Oil prices have firmed this morning weighing slightly on the pairing, which eased to just under 1.3050 from early session highs near 1.3070. More sideways action can be expected into Wednesday's BoC policy announcement, though no changes are expected.